Iraq War Costs Are High for the U.S.

The U.S. war in Iraq has lasted for more than five years. Thousands of American soldiers and Iraqis have been killed or wounded. The war has also run up a large price tag for the United States. But determining the exact cost in dollars and cents is elusive and politically sensitive.

In the days leading up to the war's opening salvos in 2003, Bush administration officials played down the costs of a war with Iraq. They pointedly dismissed any high estimates, as then-Defense Secretary Donald Rumsfeld did in a pre-war interview on ABC television's This Week program. "The Office of Management and Budget estimated it would be something under $50-billion," Rumsfeld said. ABC's George Stephanopoulos countered, "Outside estimates say up to $300-billion," to which Mr. Rumsfeld replied, "Ugh. Baloney!"

Now even conservative estimates -- including those of the non-partisan Congressional Budget Office -- say the war already has cost the U.S. government at least $500-billion and that it will likely end up costing at least one trillion dollars before it is over. Just to give an idea of the enormity of such figures, one trillion seconds in time equals nearly 32-thousand years.

$3,000,000,000,000?

In a recently published book, Nobel Prize-winning economist Joseph Stiglitz asserts that the overall costs of the Iraq War to the U.S. economy could top three trillion dollars. "This is our estimate, conservative estimate, of what the total cost of the war will be. That includes what we've already spent, and what we will spend, for instance, for the health care and disability payments of our returning disabled veterans. Forty percent of them will be coming back with disabilities and many of them will need a lifetime of care," says Stiglitz.

Confronted with Stiglitz's controversial estimates, the White House initially refused to be drawn into a debate over the war's costs. But in March, President Bush fired back on the issue, arguing that the success of the troop surge in Iraq undercuts criticism about the economic cost. "War critics can no longer credibly argue that we're losing in Iraq, so now they argue the war costs too much. In recent months, we've heard exaggerated estimates of the costs of this war. No one would argue that this war has not come at a high cost in lives and treasure. But those costs are necessary when we consider the cost of a strategic victory for our enemies in Iraq," Mr. Bush said.

Why were the administration's initial estimates so low? If there is one area of consensus on the issue, all agree that it is in large part because the war has lasted longer than its planners expected.

Variable Costs

Steve Kosiak, a defense budget analyst at the Center for Strategic and Budgetary Analysis, says the high troop levels and the wear and tear on equipment during the extended occupation have taken their toll. "Well, the main reason the estimates were so far off the mark was that the administration assumed that they would go in -- it would be like the 1991 [Persian] Gulf War, where we went in, fought a war and left almost immediately, left virtually nobody there. That would have been a very different operation. Even at that, they probably underestimated the costs," says Kosiak. "But they didn't assume any kind of post-war occupation or peacekeeping stability operations. And, in fact, we've had about 150-thousand troops in Iraq for the past five years."

The corollary question is: Why is there such disparity on both current and future costs? The main reason, say analysts, is that economists differ on what to include in estimates apart from direct military costs. Joseph Stiglitz, for example, includes not only long-term health care costs for veterans, but also the sharp rise in the price of oil during the past five years -- from $25 a barrel in 2003 to around $110 a barrel now -- a price hike, Stiglitz says, that is at least partially attributable to the Iraq War.

Peter Orszag, Director of the non-partisan Congressional Budget Office, or CBO, says the overall estimates of Stiglitz and like-minded colleagues are too high because they put extra factors into the mix and inflate the future costs of veterans' health care. "There's a different concept. They're trying to measure a much broader concept of costs. And I should say, I'm a friend and, indeed, co-author of Joe Stiglitz's, but I have to say on this, there's a lot of controversy surrounding some of those other measures," says Orszag.

Another controversial inclusion in the high-end estimates is interest paid on the federal debt. Economists point out that the Bush administration has adopted a "fight now, pay later" approach to war spending.

Steve Kosiak of the Center for Strategic and Budgetary Analysis says that at least some of the mounting interest on the debt is a result of the Iraq War. "We basically have responded to this war by putting it on our national credit card, by taking out loans, borrowing, to pay for the operation. That is unlike past military operations when we often raised taxes, typically raised taxes, at least somewhat, and sometimes cut back other programs to pay for the operation. And those interest costs can be substantial. It's hundreds-of-billions of dollars over the coming decade," says Kosiak. "On the other hand, to attribute all those interest costs to the extra cost of the war may not be fair, either."

More than Dollars and Cents

The CBO's Peter Orszag says the differences over estimates of such mind-boggling numbers should not deter economists from analyzing the costs versus the benefits of the Iraq War. "One can get intimidated by very big numbers. The bottom line is, there is no question that the costs involved are very significant -- not only for the families and soldiers, but also for the federal government. And a broader question is whether those costs are worth whatever it is we are getting in exchange for them," says Orszag.

Most economists say paying back the bill for the Iraq War will take considerable time and that much of the cost will be passed on to America's next generation.

This story was first broadcast on the English news program, VOA News Now. For other Focusreportsclick here.